Companies & Industries

Defying Expectations: Mexico

The U.S. should engage and understand its surprisingly strong neighbor to the south, Arnaud Chevallier tells Marshall Goldsmith

Recently, while giving a class at the Universidad de Monterrey (UDEM) in Northern Mexico, I met Arnaud Chevallier, dean of the graduate school. Arnaud, 33, is a Frenchman with a U.S. education and work experience in engineering, management consulting, and academia. Arnaud helped me discover there is much more to Mexico than I realized, and it's in our best interest as neighbors to get to know the real thing. Arnaud and I discussed what oil-rich Mexico needs to do vis—à—vis education and competitiveness, and what it is doing to develop the next generation of leaders. Edited excerpts of our conversation follow:

MG: Do we Americans have the right perspective about Mexico?

AC: That depends. If you're thinking about sombrero-wearing, Corona-drinking (AHBIF) mariachis, you'd be surprised: First, at $8,340 income per capita, Mexico is not a low-income country—it's a middle-income country. In fact, it has the highest income per capita of Latin America. Also, with a life expectancy of 75 and 98% of school-age children attending schools, some of the country's vitals are quite good.

Now, you have to contrast that with a lot of inequalities: 50% of the population lives in poverty; 20% in extreme poverty.

What do you need to do then?

We need to improve our education, increase our competitiveness, and become better citizens.

Is the education that bad?

There are two concepts here: how much of the population we educate and how well do we do it. The percentage of the population in school until 11 years old is similar to that of Argentina, Brazil, and Chile. After 14, though, Mexico is just not as good as its peers. Just a quarter of the population age 25 to 34 has finished high school, which is the lowest among the Organization for Economic Co-operation & Development countries.

In terms of quality, Mexico has a lot to do: The government seems conscious of the challenge and has started implementing a federal program, so we might see some progress soon.

How about competitiveness?

It's still expensive to do business. And corruption, although receding, remains high. In addition, our situation calls for drastic changes in mentality and habits. It's a concept you might have heard of: What got us here won't get us there. Actually, though, it's a bit scarier; what got us here won't maintain us here.

First, we're oil-rich, but we don't know how to exploit it, so we need to reform our energy industry. There are heated debates in the Congress these days; we'll just have to wait and see how it turns out.

Second, we're losing to Asia in many low-price, low-value-added goods. They're doing to us what we did to the U.S. a couple of generations ago: make the same products but for a fraction of the price. The point is to stop dwelling on it and move on: We've been there and done that. The global economy is very simple. It's up or out, so it's not about trying to compete with China on costs. We need to add more value to our products and charge a premium for it.

On the positive side, we sit next to the largest consumer market in the world. That's a definite advantage for products that are expensive to ship or need to ship quickly. Also, we have a large potential for ecotourism virtually everywhere in the country.

Do you have the right mindset?

I think some of us do. For instance, we started a business incubator at UDEM, which already has some success stories. Some of our recent graduates are eager to take risks. We need to help them, providing adequate guidance and support and ample access to capital. Also, we need to foster innovation by reducing the cost of failure; our entrepreneurs should be allowed, if not encouraged, to fail in their projects.

What does become "better citizens" mean?

First, we need to make sure that the rich and the poor know each other. In theory, the government has a good program to do that: It requires that all college graduates spend at least a few months doing social service.

One of the main goals at UDEM is to train the next generation of leaders, and we make sure that they understand leadership is serving others. As they study, they have four years of exposure to underprivileged communities, and they understand that it is their responsibility to improve the life of these communities. It has taken a lot of trial and error, but I think we are getting really good at it. Some of these ideas are re-applicable to reducing the gap in the U.S., too.

If nothing else, we need to protect our potential for tourism, our water sources, and make sure that lung cancer does not become a huge cost. The real point, though, is about changing mentalities, getting people to become responsible citizens, and that requires also protecting our environment.

Does the U.S. have a role in there?

Yes! When you look at how Europe is integrating new countries, it is shameful to think that building a wall is the way to go for the Americas. We need to stop doubting the benefits of Nafta to the U.S., Canada, or Mexico and actually extrapolate it to other fields, such as unifying our educational systems. Europe is doing it with the Bologna process. It's a great way to foster exchanges and promote mutual understanding.

There are more than 10 million Mexicans in the U.S. They are a primary source of revenue for Mexico and a sizable part of the U.S. economy. It is not a matter anymore about deciding whether we want to be interdependent but rather making sure that we are managing this interdependency in the best interest of both countries. This requires active involvement on both sides.

Can we contact you?

Absolutely! I am at achevallier@udem.edu.mx; you might also want to check UDEM's Web page: www.udem.edu.mx.

MG: Readers, please e-mail me with your comments and perspectives about Mexico and our role there.